Social Security is no more a ponzi scheme than any other pension system. What is wrong with Social Security is that Congress decades ago stopped setting the money aside (did it ever?) and used the incoming money for the general fund.

If Social Security money were invested in a diversified global bond fund it would never become insolvent.

Social Security is a great program that has been mismanaged. That's not ponzish, that's idioticish.

"In its inception it was a pension system, but now it is a ponzi scheme."

It was created as a forced retirement program, not a pension system, designed to open up jobs for younger workers. The retirement age at it's inception was set higher than the average life expectancy at the time. If preserved in it's original form, the current eligibility age would be around 80. It wasn't instituted to provide retirement benefits to everyone...it wasn't even originally planned to be a permanent program. It should have been done away with 60 years ago.

"Social Security is a great program that has been mismanaged. That's not ponzish, that's idioticish."

I'd argue that it is "ponzish". The program served it's original purpose, and then the gov't decided to turn it into a permanent pension type program. Did they do so with good intentions, or did they do it with "idoticish" intentions of blowing the funds elsewhere? I'd bet on the latter, which makes the permanent pension version of SS a ponzi scheme from it's inception.

In any case, why should employees and employers be forced to contribute money to a gov't sponsored "pension"? Those that work 40 years and retire rarely receive SS benefits totaling the contributions they make and those made on their behalf. Most would be better off parking those contributions in a basic savings account until retirement.

From Paul Craig Roberts, former Assistant Secretary of the Treasury- "What I am about to tell you might come as a shock, but it is the absolute truth, which you can verify for yourself by going online to the government’s annual OASDI and HI reports. According to the official 2010 Social Security reports, between 1984 and 2009 the American people contributed $2 trillion, that is $2,000 billion, more to Social Security and Medicare in payroll taxes than was paid out in benefits. What happened to the surplus $2,000 billion, or $2,000,000,000,000.The government spent it.Over the past quarter century, $2 trillion in Social Security and Medicare revenues have been used to finance wars and pork-barrel projects of the US government. Depending on assumptions about population growth, income growth and other factors, Social Security continues to be in the black until after 2025 or 2035 under the “high cost” and “intermediate” assumptions and the current payroll tax rate of 15.3% based on the revenues paid in and the interest on those surplus revenues. Under the low cost scenario, Social Security (OASDI) will have produced surplus revenues of $31.6 trillion by 2085..."

If you want to outlaw abortion, you call it "murder". If you want to abolish the Estate Tax, you label it "Death Tax". If you don't like Congressman Ryan's Medicare proposal, you call it "Vouchercare". And if you want to get rid of Social Security, you call it a "Ponzi Scheme".

Nothing new under the sun. But fact is that the vast majority wants to keep Social Security, pretty much the way it is. So, nice try, Governor, but even if you win the election, I don't see Social Security disappear.

Census Bureau estimates of the US population through 2050 indicate an increase in the population between 18 and 64, unless we assume no net immigration. With the number of people available for work increasing, the number of people actually working will also increase, unless we assume that the unemployment rate will forever increase.

Over the same time, the population 65 and over will grow faster. That is a concern for Social Security, since there will be fewer people working per beneficiary. But that can be fixed by slowly increasing the retirement age, slightly adjusting the COLA increases, increasing the maximum income over which Social Security taxes are due, or a combination of those.

1) If social security revenue had not been spent by short-term thinking democrats and republicans, for general purposes, but had instead been locked up and invested relatively conservatively in a U.S. sovereign wealth fund for the last sixty years (as it should have been), there would be no problem at all. SS is like a pension that doesn't try to earn any returns at all. The problem is the investment profile, not the fundamental structure.

2) Moreover, try to think a little bigger. Arguably, all of capitalism and the stock market is a Ponzi scheme if you don't assume increasing population growth. That's one of the main reasons Japan has stagnated for fifteen years. It's why people are worried about Baby Boomer retirement waves. It's why people are down on the economic growth profile of Russia. It's why people are starting to get worried about China's one-child policy. So for this reason and for reason one above, let's not get too cute with the SS ponzi scheme stuff. Let's just get busy with the missus and try to keep up some modest population growth. Because otherwise, I think any objective observer would agree that we have far greater fish to fry than what to do with SS.

For SS to be a Ponzi scheme you have to define "Ponzi scheme" so broadly that it would include insurance, the stock market and quite possibly money itself. A Ponzi scheme is only sustainable provided new members to continue to participate - but that's not enough. For it to be a Ponzi scheme participants must be under the impression that their contributions are being invested when in fact they are not. With SS there is no such deceit - we know that a substantial portion of current contributions are going to current retirees. You get a mailing every year telling you exactly that.

All right, let's not call it a PS, but at least it's not a good program. I just wonder why it's enforced into law. Is it lawful to force people to take part in something against their wills? At least myself doesn't want to participate the program and willing to take care of my own future.

you are a cat. And, you can't do math. The X generation is small, but the Y generation (millenials, echo boomers, whatever) is large. The hole is Social Security, even with misappropriations, is temporary.

@David

sigh. Are you that warped or just trying to stir division? A ponzi scheme has to be deliberately created to steal to be a ponzi scheme. Calling it that is just as somebody pointed out, rhetoric. How much to the Koch's pay you? Or are you just one of the zombies who read half of a few books.

Folks, Social Security is what the name implies. It is easily fixed. Just because people are stealing from it, doesn't mean it should be destroyed. We shouldn't allow it to be stolen from. Any logical person should be able to understand that.

When you bring up the Koch brothers, I know you are just another left wing drone that doesn't actually understand libertarianism besides the talking points you were spoon fed by MSNBC. The Kochs despise people like me, and Ron Paul.

You are also intellectually dishonest I posted the definition of a Ponzi Scheme right there in my comment. Where does it say it has to be created in order to purposefully steal? (And, what do you think the role of government is? Do you think they do this stuff out benevolence? Are you that stupid and naive?)

Get a freaking clue. Who are these noble, selfless angels in government? To be a liberal is to be the naivest sucker that ever walked the face of this earth.

I admire the fire Lysander Spooner had in his soul and the intellect behind it. In my opinion he would have been better received by just about everyone had he found a way to add some sugar to the medicine he recommended for the ills of society.

All this bantering about on the term "ponzi scheme" is a waste of good intellect. Just because someone says they have a chocolate colored rolls royce doesn't mean the car has to taste like chocolate. (pleasant thought thought) The conveyance of the idea that the car resembles the color of chocolate is the point. Trying to hold someones feet to the fire because they call ss a ponzi scheme is crazy. To be defined as a ponzi scheme would require that every word that describes the ponzi scheme be met. Good luck with that.

SS resembles a ponzi scheme, it hasn't quite yet morphed into the the vanilla definition one though. Give it more time....

"In the United States, Social Security refers to the federal Old-Age, Survivors, and Disability Insurance (OASDI) program" (emphasis as shown on the linked page).

SS is an insurance program, not an investment operation. Fair comparison is to other insurance programs, not to investment operations. And in the insurance world, it is common practice to pay current claims and operating costs from current premiums, to move excess premiums to reserves, and to pay claims exceeding premiums from reserves. That is exactly what SS does or plans to do.

To remain in baseball terms: you cannot receive strikes against you if you are not at bat.

I know you try hard, butt you just aren't all that. Guys like me have out read you, out performed you and are generally liked to boot. Liberal? Heck, that's silly. I"m anti-extremist with anything. The middle way baby. Buddha had it right.

I've explained time after time why and how Austiran School economics is misinterpreted and misunderstood over and over. Ron Paul has some good ideas about minding our own damn business but he's too extreme on that. And, he's just plain wrong about the FED needing to be abolished, killing the Department of Education and America needing a Greece style austerity.

America is so resource and technology rich that we can overcome our current straights relatively easily if we do just a few things. Having a real energy policy and getting rid of tax loopholes are probably the major two things we need to do in addition to flattening spending. Breaking promises to most of the population isn't the solution to fixing our minor budget issue.

You du try hard, I have to give that to ya, butt you are just wrong on a lot of things.

Bloomberg has it wrong. At least one piece of social security is a fraud - the trust fund.

The gov't presents the trust fund as something of value. From the SS website. Far from being "worthless IOUs," the investments held by the trust funds are backed by the full faith and credit of the U. S. Government.

In order to have value, the outcome of SS has to be materially better with the fund than without it. It isn't.

Two scenarios - with and without a trust fund.

With the trust fund:

When SS cash-out exceeds cash-in, it needs to tap the trust fund. The administrator calls treasury and redeems some of the the special issue securities. Treasury has three options - take the money out of general revenue, issue bonds, or default. Treasury may need authority from congress to respond, e.g. debt ceiling.

Without the trust fund:

When SS cash-out exceeds cash-in, it needs additional revenue. Congress has three options - fund the shortfall out of general revenue, issue bonds, or default.

Same outcome either way, just a slightly different path to get there. Once SS cash-out exceeds cash-in, gov't officials have the exact same three options - fund the shortfall out of general revenue, issue bonds, or default.

Therefore, the trust fund adds no value to the system as claimed by the gov't and that makes it a fraud.

Are there fixes? Sure. Will congress fix it? Maybe.

But, as it stands today, you can check off 'fraudulent' on the 'is it a Ponzi scheme' list.

I know you try hard, butt you just aren't all that. Guys like me have out read you, out performed you and are generally liked to boot. Liberal? Heck, that's silly. I"m anti-extremist with anything. The middle way baby. Buddha had it right.

HAHAHA, way to change the subject loser. I punked you,. b*tch. Mr. Kirk with his fancy website just got owned by a guy he can "outread", ROFL. You have no response to my criticism of SS, so you change the subject to how smart you are. I'm sure your mommy is proud.

If you have to talk it, you can't walk it. You "outread" me? ROFL, ok. Did you get a medal for this? A button? Perhaps you treated yourself to a cookie? You have "outperformed" me? When and where? In the sack? In the classroom? In your imagination? In a CAPS game? In a hot carl competition?

Yes, you're anti-extremist. The problem is that anyone outside the narrow range from Hillary to Romney is extreme. But $100 Trillion in unfunded future liabilities? No, that's not extreme. Calling attention to its unsustainability? How dare I?! Appearantly, to you, that's extreme. LMAO. Yeah, you really have it covered big guy. A real thinker!

I've explained time after time why and how Austiran School economics is misinterpreted and misunderstood over and over. Ron Paul has some good ideas about minding our own damn business but he's too extreme on that. And, he's just plain wrong about the FED needing to be abolished, killing the Department of Education and America needing a Greece style austerity.

Hahaha, this paragraph shows exactly how idiotic you are. You think Greece helps your position? Hmm, way to look at the end result with no comprehension of causality. This is like talking to a zombie.

And pray tell, what are these excellent rebuttals of the Austrian Theory. Of my 9,000+ rec'd posts, I don't recall you offering even the slightest criticism. In fact, what was your response to my last blog (76 recs and counting) on MMT and Mises? "It's too long to read". Hahahah, big thinker you are!

Oh and one more thing. I'm willing to bet that you have NEVER read one book on Austrian Economics cover-to-cover.

How safe do you think that bet is, big reader? =D

Now run out and write a blog on ABCT, so I can smash it to pieces for its complete lack of comprehension or coherence. I am salivating. I cannot wait to slap around "the guy that outreads me" like a red headed step child again.

I've explained this before, so I'll bring it up again. The United States, for all of its faults which are many, is in a unique position based upon maybe more than anything, excellent resource rich geography. Since Ike, we have bought other nation's resources so that we did not have to use ours, and they could build their nations with the money we sent them. We are just in another part of history now where we will start to use our own resources and become an exporter at higher prices. Think about that. We in fact did become a net exporter, only slightly, but still a net exporter, of energy in the past year. That trend will continue for decades. We also will feed much of the world for a long time, maybe forever.

The dollar will remain strong because nobody else is as strong as us in resources, political stability (even if it is gross right now), militarily or frankly, morality. We are the Prince of the planet and that will not change. The plans laid in place under Ike, are still in place for the most part. Politics doesn't do anything too dramatic or look that different from decade to decade because in fact, there is a plan for America, and it's going roughly according to plan. Yeah, some political hacks weasel in and steal, they are human after all. If Perry (or Bachmann or somebody similar) becomes President, there will be another W. Bush like episode for America which would set us back a decade or so. If Obama remains President, especially with a narrow Republican House, things will slowly get better as the long term plan plays out.

A $100 trillion in liabilities, which is about $300k per person per lifetime, is probably an accurate estimate. That is not a much larger number when broken down per capita than we already produce in excess in a lifetime. The liabilities are plenty funded. Those liabilities are funded by the resources and earning capacity.

The combination of tapping our own resources, exporting some, using the rest, and alternative energy technology, which is 90% of the way there finally, will allow the nation to not only pay its debts, but most likely have a major boom in the 2020s and 2030s.

Yes there is a catch, we have to flatten spending over the rest of this decade. There is no doubt about that, I agree. The numbers, if you really can do math, and I know most people can't (why does Ron Paul want to get rid of the Dept of Ed), the numbers say that America is going to be just fine, so long as we stop digging soon.

To say you punked me, wow, that's pretty silly. I'm over your head, and that's ok. It's my fault for not writing a book I guess that makes things easier to understand.

oh and one more thing, over the past twenty five years I have read darn near everything on Economics. To somehow come off as an expert due to having perused some Cliff's notes as you do, well, again, silly. Plain silly. Even for a PhD it would be silly.

I notice once again that you step around the issues at hand. I have shown convincingly that SS is a Ponzi Scheme. You cannot defend the position you took in the blog, so rather than accepting that your position was weak, you lashed at me in comment #16:

Calling it that is just as somebody pointed out, rhetoric. How much to the Koch's pay you? Or are you just one of the zombies who read half of a few books.

Note very clearly: I have NEVER personally attacked you like this. So go cry to someone else.

You are both wrong on this issue, wrong on ABCT, wrong on your perceived superior scholarship, and wrong on making this personal. If you can't handle my responses, don't make it personal.

As silly as you are, I am not going to repeat myself for you. I have responded by post or link to every silly idea you have. While I admire your dedication to freedom, your approach ultimately leads to a more dangerous society which always leads to less freedom. Think about that. Folks who go as far over the edge as you are self-defeating and frankly drag us all down. Yeah, you do it with your heart mostly in the right place, but you do it.

And honestly, it's not personal, if nothing else since you won't reveal who you are. Butt, you have, in many posts, made personal comments and disparaged people who did not read the same Cliff's notes as you, even though they were generally right and that got you bent because it conflicted with your self validating ideology.

While I admire your dedication to freedom, your approach ultimately leads to a more dangerous society which always leads to less freedom.

ROFL! Yeah, those freedom mongers really screwed it up in China, Russia, Germany, Cambodia, Somalia, Ethopia, Liberia, and every other place we have seen countless unspeakable atrocities. And all that stupid hick "freedom talk" from Jefferson and Adams really screwed America over in 1776. What a bunch of dummies. I had better reconsider! Hahahhahahaha!

Again, you sidestep the issues at hand. Now, I'm starting to wonder if you are a pathological liar.

Butt, you have, in many posts, made personal comments and disparaged people who did not read the same Cliff's notes as you

Look how change the terms again, you lying little snake! Hahahaa, I said I never made it personal with you. For all the reading you do, reading comprehension is sure lacking. Shed crocodile tears for my opponents elsewhere. I am unmoved.

Here are three things I want you address:1. Your claim that I am on the Koch payroll/unreading zombie2. My defeat of your SS argument3. My challenge to your supposed criticisms of ABCT

2. In your own mind, which I can't unravel apparently, hence why I posted a few links. Butt in short, Social Security is no more a ponzi scheme than a looted pension. The same remedies apply, that is, stop the looting.

3. As I have said, Austrian approached work for most other nations. Not the United States. You fail to recognize that there are unique circumstances here. I have given you a hint, figure it out, you reader.

As for your freedom ideas, you have bastardized some very good ideas by pushing them over a mountain top. If there is too much freedom, i.e. anarchy, there becomes less safety and that in turn leads to less freedom. Libertarians have lately ignored that entire construct. I simple acknowledgement that there are limits even to personal freedom would suffice as your indication of understanding of that. If you can not acknowledge that, well then, my fear is right, and your are a fraud or an ignoramus with a nice vocabulary.

1. No. I despise everything he stands for and I'm sure it would be mutual if we ever met.

2. Saying it over and over doesn't make is so, pal. As I should above, SS matches the definition of a Ponzi Scheme almost to perfection.

3. The Austrian School approach has never been fully instituted in any country. The closest would be America from 1836-1914, but even in that historical episode we see countless very important variations.

4. I only take the idea of liberty (not freedom, that word is very loaded) to its logical conclusion. If this logical conclusion bothers you, that is not my problem. If it wrong, take the time to show me how. I have no interest in forcing you to follow my lead. All I ask, and this shouldn't be so hard, is that you do not advocate that any other person take my liberty without my consent. That's it. Again, not so much to ask, I don't think.

We shall hopefully debate again. Perhaps less contentiously, but that is not up to me. I give back exactly what is given.

If liberty is taken to a level where it deprives others of their liberty, it is no longer liberty. It is the very tyranny that moral men hope to avoid. As in all things, there is a balance we must all pursue, not only for others sake, but our own. Individual liberty is only moral and right to the point where it does not impinge upon the liberty of others.

Every serious analysis of Social Security I have seen shows that there will be approximately a 25% shortfall in its ability to pay benefits in the relatively near future. And that is even assuming that the "trust fund" (a file cabinet full of IOU's) will be honored.

If anybody that works for a company doesn't think their wages are less because of the employer's matching contributions they are a special kind of stupid. If you have your own company, you know what a big bite SS takes. I wish I would have been able to invest all the money I payed into the system on my own.

I know I said I wouldn't add to this post but I reserve the right to do whatever I want whenever I want. Especially the case, when I come across so:mething WAY TOO JUICY:

HT to EPJ:

Greg Mankiw, the current top selling economics textbook writer, highlights a 1967 Newsweek column where (Keynesian icon Paul) Samuelson admits that Social Security is Ponzi scheme but thinks it will go on successfully forever, anyways. Samuelson wrote:

The beauty of social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in -- exceed his payments by more than ten times (or five times counting employer payments)!

How is it possible? It stems from the fact that the national product is growing at a compound interest rate and can be expected to do so for as far ahead as the eye cannot see. Always there are more youths than old folks in a growing population.

More important, with real income going up at 3% per year, the taxable base on which benefits rest is always much greater than the taxes paid historically by the generation now retired.

Social Security is squarely based on what has been called the eighth wonder of the world -- compound interest. A growing nation is the greatest Ponzi game ever contrived.

Keep in mind that Samuelson was the most influential liberal economist for 30-40 years. This is the equivalent of the leading neocon admitting that 9/11 was blowback for previous foreign policy mistakes.

You use such absolutes, that is so silly, and frankly weakens your arguments. It is "irrefutable" that Social Security is underfunded for about a twenty to thirty year period beginning in the 2030s. It is not irrefutable it is a ponzi scheme. By your definition all pensions are ponzi schemes.

Flatten the benefits by degrading the COLA, raise the age to receive benefits a year or two, restrict age 62 retirements for blue collar workers and actually segregate the funds to a global bond account. That's it, that's all that needs to be done. Easy. Irrefutable even.

No, a pension scheme where the actuarial value of the contributions equals the value of the payouts is sound. The problem is that SS and a lot of other ones like CALPERS did not charge the clients nearly enough.

but not actuarily sound does not mean it is automatically a ponzi scheme. Heck, even Rick Perry is backing off of that. The simple facts are that social security is easily fixed and probably will be using a package similar to what I described.

You have got to be kidding me... When will the vast and ingorant masses learn???????

It has been and always will be a Ponzi Scheme ... If you are out of work and dont pay (enough sequentiual quarters), regardless of the the previous years of payment... Your disability benefits are no longer available. Voila... nanny state, beaurocratic heaven, and socialism all wrapped up into a great little program to fleece the naive and unsuspecting public.

Ever wonder why our vaunted leaders dont pay into this nasty little pig? Welcome to the America where all persons are equal... except some are more deserving than others.